Monday, 10 March 2014

What's happened to my eight years?

I've just written to the government's Pension Service again.

According to them, I have thirty-eight qualifying years to put towards my forthcoming State Pension, but only thirty are needed to provide me with the maximum possible pension under current rules. What then do they do with the eight not required? They must have a value. Can I get a refund?

A refund would be very nice indeed. I'd probably use it to buy additional pension benefits in October 2015. According to a recent announcement (which may be made clearer in the Budget on 19 March), people like me, who reach Pension Age before the much better New State Pension starts in 2016, will have a one-off chance between October 2015 and April 2016 to purchase a top-up. If affordable, this will close the gap somewhat between the old and new pensions.

I'm quite sure that my eight years have some value. I don't know what it is, nor how it would translate into an actuarially-calculated pension top-up, but I can tell you that in the last eight full contribution years in employment up to 2004/05, as much as £17,029 was taken from my salary in employee contributions. You have to add the employer contribution to that. So you're not telling me that there is nothing in the 'surplus contribution' pot!

I've searched the Internet for any information easily available on what is done when a person has 'too many' years in hand. But so far I've found nothing useful. I'm beginning to suspect that there is a gap in the law. In the past, until the Pensions Act 2007, 'surplus years' were hardly heard of. Now they are appearing - but there may be no legislation to say what one does with them.

I don't necessarily need a cash refund - I'd be happy to know, in writing, that my eight years have a definite credit value, and will buy me a top-up that way. What I don't want to hear is that the eight years are going to be 'lost', and become in effect an extra bit of tax, and hard luck on me.

And if I don't get a cash refund or a top-up credit, and the Pension Service won't (or can't) quote the piece of statute that says 'no', what then? Well, there are pensioner groups who lobby on behalf of their members, and they may be running with this already. The obvious one for me is the Civil Service Pensioners' Alliance. Alternatively, there will be at least one MP who champions pensions issues, and who can look into it on my behalf.

3 comments:

  1. I shall follow your progress with great interest, Lucy. I had 48 qualifying years, and nothing to show for those 18 extra ones.

    ReplyDelete
  2. It seems absolutely clear that unused years cannot add anything to the State Pension itself.

    But then there is the Second State Pension. My last Pension Forecast showed a miniscule 2SP because while working I'd been in the Principal Civil Service Pension Scheme and its post-2001 successor, both contracted-out to give me a higher CS Pension, but almost no 2SP.

    I anticipate being told forthrightly that these eight surplus years cannot be converted now into cash refund or a credit towards future benefits. The contributions will just be retained. But we shall see.

    Lucy

    ReplyDelete
  3. The state as you know has yearly frittered away any "contributions" and no pension pot exists just a promise and hope to feed us old folks in the future from new "contributions".

    As with the tax system, endless new rules apply each year and nobody probably understands the full set of rules. I shall be happy and surprised if I ever get a pension and as ever with my life so far find myself suspended in a limbo of such complications of changing legislation I dare not venture an enquiry lest I burst someones blood vessels trying to work it out...

    Been living on air for decades so a few more years will hardly matter...

    Look on the bright side Lucy, the earlier you retire the longer you will collect that pension so you will win in the end, studies have proved it!

    ReplyDelete

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